New Consumer Protections

Major new consumer protections are introduced to the Building Act in a new part

Major new consumer protections are introduced to the Building Act in a new part: Consumer rights and remedies in relation to residential building work. Scheduled to come into force from late-2014, this part:

requires builders to provide certain information before a contract is signed

sets minimum requirements for residential contracts over a certain value

explains implied warranties in these contracts

provides remedies for breaches of implied warranties

requires builders to fix defective residential building work if notified within 1 year of completion without question

This section does not cover design work or the relationship between the head building contractor and subcontractors.

Information disclosure is mandatory

For building work above a certain sum or at a client’s request, the builder must provide certain disclosure information, including a checklist. A builder who doesn’t hand over the required information can be fined up to $2,000. A builder who knowingly gives false information or leaves out key facts can be fined up to $20,000.

Information may include:

the legal status of the builder, including whether they are an individual, a partnership or a company (and if the builder is a limited liability company, the role and business history of each director)

whether the builder has been involved in any disputes

the skills, qualifications, and licensing status of the building practitioners doing the work.

The building checklist may include:

an explanation of the legal obligations of the client and the builder

an outline of the risks of paying in advance for building work

a summary of dispute resolution options

sources of further information.

Written contracts become mandatory

For building work above a certain minimum sum, there must be a written and dated contract, and it must meet any requirements set out in regulations.

New remedies for breaches of implied warranties for work on household units

In residential contracts, the following warranties are implied and are taken to form part of the contract:

The building work will be carried out competently, in accordance with the contract plans and specifications and the consent.

Materials will be fit for purpose and will be new unless otherwise stated in the contract.

The work will meet all legal requirements.

The work will be done with reasonable care and skill and completed by the date (or within the period) specified in the contract or, if no date or period is specified, within a reasonable time.

The unit will be suitable for occupation on completion.

If the contract states a particular purpose for the work or the owner wants a particular result, the building work and materials used will be reasonably fit for purpose or be of a nature and quality to achieve that result.

Builders can’t contract out of this. It applies to the work of the builder and of anyone – employees and subcontractors – the builder is responsible for.

The client may require the builder to fix the work and repair or replace defective materials. If the builder does not fix things within a reasonable time, the client may have the work done by someone else and recover from the builder all reasonable costs incurred or they can cancel the contract.

Where the breach of warranty is substantial or cannot be fixed, the client may get compensation from the builder for any reduction in value of the building work below the price they paid, or they may cancel the contract.

The client may also obtain damages from the builder for any loss or damage resulting from the breach (other than loss or damage through reduction in the value) that the builder should have known was possible.

Builders can’t contract out of these provisions.

Builders must fix defects up to 1 year after completion

Within 1 year of the completion of building work, if a defect is found and it can be remedied, clients can notify the builder and ask them to remedy the defect.

The builder must remedy the defect (including repairing or replacing defective materials supplied by the builder) within a reasonable time.

The builder may also have to pay the client for any loss or damage to the client resulting from the defect (other than loss or damage through reduction in value) that they should have known the defect could cause.

This applies only to contracts entered into after this section comes into force in 2014. It doesn’t apply if the problem wasn’t the fault of the builder or anyone the builder was responsible for or if the householder neglected maintenance or failed to act as soon as the defect became apparent.

Information must be provided on completion of the contract

As soon as practicable after completing building work under a residential contract, the builder must give the client and the TA the documentation listed in regulations. This might include things such as guarantees relating to the work and maintenance requirements.

Changes to terminology

The term ‘compliance document’ is replaced in the Building Act by ‘acceptable solution or verification method’ or, in a few cases, replaced by ‘acceptable solution’ alone.

Well I’ll be dammed

The Building Amendment Act 2013 also makes many changes regarding dams.

This is a brief summary only. For full details, obtain a copy of the Building Amendment Act 2013. It will be available online at www.legislation.govt.nz.